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Is Bitcoin the new nugget of gold in South Africa?

For decades, gold has been considered the number one safe-haven investment for South Africans. And for good reason, South Africa was until 1970 the foremost producer of gold in the world. However, South African investors are now looking towards innovative solutions for the new economy in the form of cryptocurrency.
Is Bitcoin the new nugget of gold in South Africa?
If we compare gold and BTC side-by-side, the price of one Bitcoin is far more valuable than the price of one ounce of gold. Currently, gold is trading at $1,255 per ounce, while one BTC is trading at $2,819. It seems a no-brainer: digital currency should get top billing in South Africa.

In rand terms, the difference is remarkable. At the current exchange rate, one BTC is worth R36,408, compared to R16,208 for one ounce of gold. Despite the large profit differential, South Africans tend to favour their gold over Bitcoin. There are several reasons for this, notably the physical nature of the commodity, and the structure of the South African economy. Gold remains the preferred safe-haven asset for South Africans, and just over 11% of South Africans have an interest in cryptocurrency like BTC. Gold retains the advantage with approximately 54% of all surveyed people preferring it.

‘Gold is lekker,’ say South Africans

33% of people surveyed were uncertain how to invest in either BTC or gold, and many of those polled are bearish on gold bullion. In recent years, BTC appears to be the financial asset in the ascendancy. On Thursday, 20 July, Bitcoin spiked to $2,948.51, just short of the June 11 record of $3,025.47. The main issue driving the price of BTC is the scaling debate.

This is simply a reference to the number of transactions that can be processed with BTC on the blockchain peer-to-peer network. The goal is to expedite transactions as quickly as possible, to increase the quantity of BTC available. Presently, there are two schools of thought about how to speed up Bitcoin mining, with BIP 91 and SEGWIT 2X dominating the scene.

For now, it appears that BIP 91 is in the ascendancy, and 93.8% of Bitcoin miners have thrown their weight behind it. This is good news for South African miners of Bitcoin, since it will make it easier to purchase the cryptocurrency and trade it accordingly. While both BTC and gold have a finite supply, the known quantity of BTC is capped at 21 million. Nobody quite knows how much gold is left in mines, but the cost of extracting gold from South African mines is proving incredibly prohibitive.

Consider that half a century ago, South Africa was responsible for the production of 75%-plus of global gold. Today, South Africa’s mines contribute just 140 metric tonnes (2016 figures) from 145 metric tonnes (2015 figures). The world’s number one gold-producing country is China with 455 metric tonnes of production, followed by Australia at 270 metric tonnes, and Russia at 250 metric tonnes. South African investors realise the diminishing returns in the SA gold-mining industry, coupled with rising costs and a weak ZAR.

Where to next for BTC?

There are concerns about how governments will regulate the cryptocurrency arena. However, until such time as this takes place there is plenty of upside potential for BTC traders and investors. Gold should never be written off as a safe-haven asset. It is stored in central banks the world over, and is typically the go-to safe-haven asset whenever economic conditions sour. As such, there is always going to be a market for it.

It is entirely possible for gold and BTC to appreciate on a dual track. It’s not one or the other. BTC has many possible applications, such as a store of value – like gold, or a new form of payment. As more South African Bitcoin traders, investors, and regular folks take to this cryptocurrency, its value will increase. Already we have seen an uptick in e-commerce sites accepting digital currency, and this is going to continue fuelling its rapid growth.

25 Jul 2017 13:27

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About Boris Dzhingarov

Boris Dzhingarov graduated UNWE with a major in marketing. He is the CEO of ESBO ltd brand mentioning agency. He writes for several online sites such as Tech.co, Semrush.com, Tweakyourbiz.com, Socialnomics.net. Boris is the founder of MonetaryLibrary.com and cryptoext.com.




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